Generation Debt: Runaway tuition costs point to grim future

Dr Jimmy Mok, dean of UCSI University's Faculty of Engineering, Technology and Built Environment, talks to The Malay Mail Online at his office on January 21, 2014. ― Picture by Saw Siow Feng

KUALA LUMPUR, Feb 9 ― Aspiring families across the country are under financial stress after years of rising university tuition fees, and the burden is heaviest on those forced to look outside Malaysia’s public university system.

While the number of public universities in Malaysia have risen over the past decade, places for sought-after courses like medicine and engineering remain limited.

And while race-based quotas for entry to public universities were abolished in 2002, the only genuine options for many non-Bumiputera families are local private institutions or universities abroad.

But costs are high and many graduates from middle income families will start their careers with a mountain of debt.

A three-year undergraduate degree at a private university here can cost over RM60,000. A degree at a university abroad can easily cost more than RM 200,000 while popular medical degrees can run around the half million ringgit mark.

By comparison, data from the Statistics Department puts the average annual household income in the country at RM60,000.

Tuition fees at many local private universities have also been rising faster than inflation.

One private university told The Malay Mail Online that it raises tuition fees by five to 10 per cent every year depending on the course of study. Another said fees have risen over 12 per cent over the past five years and will likely rise another 10 per cent over the next two.

That contrasts with Malaysia’s official inflation rate that has been under three per cent for the past few years and is widely expected to stay below four per cent in 2014 despite higher fuel and electricity prices.The costs start piling up even before a student enters university. Even preparatory courses for university entrance run into five-figure territory.

At Taylor's College in Kuala Lumpur, a General Certificate of Education (GCE) Advanced Level (A-level) course costs between RM40,000 and RM50,000 while a foundation in Science course costs RM24,000. At HELP University-College, a foundation in arts or science costs about RM20,000, while at University College Sedaya International or UCSI University, A-level costs about RM38,000.

"My dad took out money from his Employees Provident Fund (EPF). Sometimes, he has to borrow from relatives,” Amanda, a 23-year-old ethnic Indian undergraduate student at a local private university, told The Malay Mail Online when asked about funding for her studies.

She is raring to finish her chemical engineering degree so that she can pitch in to ease the financial burden on her father.

Her father, a car salesman, supports three children at private universities in the country. Only two of them were able to secure study loans from the government’s higher education fund, National Higher Education Fund Corporation (PTPTN).

Her situation is fairly typical. Malaysian students generally turn to their parents to finance their studies. Colloquially dubbed “father-mother finance”, the move invariably involves the parents dipping into their pension funds, working longer and borrowing like they have never before.

Chang Ai Ling, 61, continued working after retirement to put her son through university abroad.

Her son’s two degrees from top UK universities set her back £68,000 (RM372,000) in tuition fees alone.

“For us, having a good quality education is important, so we were willing to do it,” she told The Malay Mail Online recently.

The family picked the United Kingdom over Australia because the pound sterling was falling against the ringgit around the time her son was due to start university.

But those starting now are not so lucky. The ringgit has started falling again, making it even tougher on those hoping to study abroad.

Many students borrow from the PTPTN but the fund is itself teetering under the burden of unpaid loans and has resorted to blacklisting defaulters so that they cannot leave the country.

As of November 30, 2013, as many as 468,592 borrowers have defaulted on their loans amounting to RM3.3 billion, PTPTN said in a recent statement.

The fund said that as of end November it has issued study loans to 2.34 million people, totalling RM53.23 billion.

Borrowers are expected to start paying back their loans six months after they graduate. While the loans cost much less than what the average bank would charge, monthly repayment amounts will take a big bite out of meagre starting salaries.

For instance, the monthly instalment on a RM100,000 PTPTN loan, charged at one per cent interest and repaid over a 20 year period, comes up to around RM420 monthly. For a fresh graduate earning RM2,000 a month, that works out to roughly 20 per cent of monthly income before other deductions.

Dr Jimmy Mok, dean of UCSI University's Faculty of Engineering, Technology and Built Environment, said that 80 per cent of engineering students at the institution take up PTPTN loans, adding that an engineering degree at UCSI costs on average RM65,000.

Cheap, he said, when even primary education at international schools in Malaysia could cost RM60,000 a year.

“Engineering is expensive because we need to have facilities like laboratories and equipment,” he said, adding that some equipment could cost up to a million ringgit.

“We use English as the medium of instruction. That's the reason why we get a lot of Chinese at private universities,” he said.

While the costs of a university degree continue to rise, wages have not caught up.

Danielle Goh, a recent medical graduate, spent about RM300,000 for her medical degree from the International Medical University (IMU) and now earns RM3,000 a month as a medical officer at a public hospital .

She is not hopeful that she will recoup her RM300,000 investment anytime soon.

“People say don't study medicine if you want to get rich. You can only get rich after you specialise when you're 40 plus,” the 27 year old added.